Executive Summary: Toyota Motor Company must decide if the Hybrid market is attractive in terms of profit, and if it should accelerate the launch schedule for “Prius.” The Prius offers an expected 100% increase in fuel economy over the average 30mpg of a similar sized Corolla and Corona, and with less fuel emission it promises reduced pollution. Though the Prius is expected to provide added value in terms of fuel efficiency and less pollution, the combine effect of the challenging factors such as the hybrid power train technology being in the infancy stage, the data on market expectations are still unreliable, critical component of the hybrid such as the battery is still in developmental phase, and the average cost of a hybrid powertrain is expected to be $3000 to $4000 more than a similarly-sized conventional powered car would all be difficult for Toyota to leverage with its core competencies. Toyota should delay the launch of its Prius while leveraging its core competencies: Production efficiency to drive down cost over time, Toyota Production System to discover and solve any lingering problem, and use its marketing and sales prowess to launch the Prius in 1999. Analysis
The technology required for the hybrid powertrain is still in developmental phase and the customer acceptance is still unknown. By mid 1990s, 2,000-5,000 electric powered cars were in use in North America and Western Europe. The electric powered car production did not survive due to high cost and complicated offerings. Therefore, Toyota will have to rely heavily on its production efficiency and the innovation of the G21 team (charged with developing the car for the 21st century) to deliver on the expected value creation of the Prius. The overall auto industry has seen a significant decline in sales over the last few years due to the fluctuations in global economy. In addition, Toyota’s domestic sale has decreased from 2.4M in 1990 to 2.1M in 1995. In lite of this, Toyota...
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